Portland city commissioners on Wednesday voted 3-1 to create a $169 million urban renewal area around Portland State University.

The new urban renewal area could revitalize the sleepy south side of downtown. Portland State officials say it's also critical for the university's effort to keep pace with its rapid growth.

"Portlanders will look back on this day as a real watershed moment, a turning point in making a good university great," said Mayor Sam Adams, a longtime supporter of the proposal. "And I would say to NYU, New York University, 'Look out,' cause that's PSU close on your heels in becoming the best urban university in North America."

Adams and commissioners Randy Leonard and Nick Fish voted in favor of the proposal.

"This is a testament to the partnership we have with the city and the county," said Portland State President Wim Wiewel, in a statement. "They recognize that a great city needs a great university and today the Council cast their votes to help make that happen. This is a long-term investment in education and economic development. I look forward to working with city council, PDC, and the county commissioners in continuing to serve the growing needs of our region."

Commissioner Amanda Fritz voted against the measure, saying the area isn't blighted, a legal requirement for urban renewal areas. The League of Women Voters also raised that concern during a public hearing last week. The new district includes significant corporate offices, including the headquarters of The Regence Group, the state’s biggest health insurer.

Fritz said the city of Portland also shouldn't be responsible for funding urban renewal areas that benefit the entire region.

When the city creates an urban renewal area, it essentially draws an imaginary line around an area that it wants to improve. When property taxes in the area rise, the new property tax revenue is redirected to capital projects in the district.

Some argue against urban renewal on the grounds that it takes money away from schools and other essential public services.

Multnomah County, which could get $19 million of the money for a new headquarters for its human services division, supported the proposal. So did Portland Public Schools, which will get some of the money to redevelop Lincoln High School, the only public K-12 school in the district.

The new urban renewal area is expected to triple the tax base in the 144-acre district from $620 million to $1.85 billion. Projects could begin as early as next summer.